Connecticut small group and individual market health insurers will pay a new premium fee next year that will likely increase insurance costs for employers and raise $26 million to fund the state's federally mandated insurance exchange.

The new 1.35 percent “marketplace assessment” will be charged to virtually all small group and individual market insurers in the state, even if they do not offer health plans within Connecticut's insurance exchange. Dental insurance carriers will be hit with the assessment on their Connecticut premiums as well.

The fee will be assessed on the total premiums insurers' earned in 2012 and was recently approved by Access Health CT's board of directors. Insurers will pass on the extra costs to individuals and small businesses in the form of higher premiums, experts said.

The exchange is a key part of the federal health care reform law and will serve as an online marketplace where employers and individuals will be able to shop for health coverage later this year. So far Connecticut's exchange — called Access Health CT — has been operating on federal grant money. But that spigot will run dry by the end of 2014, forcing exchange officials to develop a business model to become self-sufficient before then.

“We had to figure out how to generate revenue flow,” said Steven Sigal, the chief financial officer of Access Health CT. “There are a variety of options and approaches being pursued by states but in Connecticut we chose a marketplace assessment.”

Sigal said Access Health CT has received about $107 million in federal grants to build its insurance exchange, but those funds will run out by the end of 2014.

By 2015, the exchange is projecting $35 million in operating expenses so it will need to generate enough revenue to cover those costs and build a safety net, Sigal said.

The exchange board considered several revenue raising ideas, Sigal said, but chose a marketplace assessment because it will maintain a level playing field between health plans sold inside and outside the exchange.

By requiring virtually all small group and individual market insurers to pay the 1.35 percent assessment, it prevents health plans not competing in the exchange from gaining a competitive edge on pricing, Sigal said.

That is particularly important since the goal of the exchange is to offer individuals and small businesses more affordable coverage.

Charging all insurers the assessment also spreads costs over a larger customer base, Sigal said.

“Everyone has the same assessment, which levels the playing field,” he said.

The assessment isn't the only exchange-related fee health plans face.

The federal government is assessing its own fee on fully insured plans to help pay for the subsidies to be offered to individuals and businesses who purchase coverage through the exchange. The federal fee is expected to generate $8 billion in 2014 and $14.8 billion annually by 2018.

That, in turn, could increase premiums by up to 3 percent, according to some estimates.

The added costs have raised concerns from businesses and the insurance industry, which have argued that fees and other reform related changes could cause insurance premiums to spike significantly next year.

Supporters of the law say those claims are exaggerated.

According to a March study by the National Federation of Independent Business Research Foundation, the new federal insurance tax alone could lead to a loss of 262,000 private sector jobs by 2022 and a reduction of sales by up to $35 billion over the same time period.

Meanwhile, the national Society of Actuaries recently projected that underlying claim costs will lead to premium increases of nearly 29 percent in Connecticut, according to the Connecticut Health Policy Project.

Andrew Markowski, the Connecticut director of the National Federation of Independent Business, said many small businesses fear insurance plans offered in the exchange won't be affordable.

“The insurers will be writing the check for the assessment but in the end it is going to be the consumers and small businesses who are going to be bearing the burden of that,” Markowski said.

So far in Connecticut, two insurers have submitted benefit plans for the state's insurance exchange, but there is still a lot of uncertainty around plan pricing.

Farmington's Connecticare Benefits Inc. proposed small group and individual insurance plans with an average price of $716 and $397 per member per month respectively.

The company, however, expressed concern that many of the federal regulations, which continue to be issued, are “vague, complex and in some cases contradictory,” which could result in the insurer withdrawing or changing parts of its rate filing.

Non-profit insurer HealthyCT proposed individual and small group market plans with average monthly premiums of $427.35 and $445 respectively.